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Analyzing Chevron’s Downstream Portfolio

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Chevron’s refining segment

Chevron’s (CVX) downstream assets base and ongoing projects will likely increase its returns. Chevron plans to expand and modernize the refining segment through capex and acquisitions.

Currently, the company has several projects under construction in the downstream segment. The projects include modernizing and upgrading existing facilities at the Richmond refinery and the alkylation project at the Salt Lake refinery. The projects aim to expand feedstock flexibility and increase the production of higher value and lighter products to generate better margins.

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Chevron is ready to benefit from IMO (International Maritime Organization) 2020. From January 1, 2020, IMO will restrict the sulfur content in marine fuel to 0.5%. Chevron seems to be positioned to serve the marine industry’s demand after IMO. The company has been consistently modernizing and upgrading its refineries to stay tuned to the latest norms.

Chevron has agreed to acquire the Pasadena Refining System from Petrobras (PBR) for $350 million—excluding working capital. The acquisition will add a 110,000 bpd (barrels per day) refinery in Texas to Chevron’s downstream asset base. Chevron’s worldwide refining capacity was 1,627 Mbpd (thousand barrels per day) as of December 31. The acquisition will likely increase the company’s ability to process more domestic light crude oil in its Gulf Coast refining system.

Chevron’s petrochemical growth

Chevron is standing firm in the petrochemical industry with the startup of the mega petrochemical complex in the US Gulf Coast. The project’s ethylene plant runs at full capacity. Currently, Chevron and its partners are evaluating the setup of another petrochemical complex in the US Gulf Coast. The area provides long-term access to advantaged feedstocks and ethane.

Going forward, Chevron’s growth activities could expand its capacities and enhance its margins, which would strengthen its downstream segment.

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